Low Demand triggers Slight Pullback in FGN Bond Yields – The4 day bullish run in the FGN bond market cooled off as we witnessed some profit-taking to close the week. The market initially started on buying note, however, this was short-lived as more traders began to hit bids with the intent of opening fresh short positions at the current market level. The 2045 paper was met with a stalemate at 13.20%/12.90%, while the 2049 bond had most of its trade settle at 13.37% levels. We also saw improved offers on the 2050s paper at 13.40% with bids staying firm above the 13.50% level. By and Large, yields expanded slightly by c.2bps across the benchmark curve.
The recent rally in the bond market is expected to spur decent demand from market participants at the bond auction next week which will present a decent opportunity for the DMO to raise sizeable cash at lower rates
| Benchmark FGN Bonds | ||||
| Description | Bid (%) | Offer (%) | Day Change (%) | |
| 12.75 27-Apr-23 | 11.98 | 11.04 | 0.00 | |
| 14.20 14-Mar-24 | 12.23 | 11.55 | 0.00 | |
| 13.53 23-Mar-25 | 12.49 | 11.37 | 0.00 | |
| 12.50 22-Jan-26 | 12.64 | 11.50 | 0.15 | |
| 16.29 17-Mar-27 | 12.76 | 12.53 | 0.06 | |
| 13.98 23-Feb-28 | 12.66 | 12.40 | (0.06) | |
| 14.55 26-Apr-29 | 12.70 | 12.38 | 0.00 | |
| 12.15 18-Jul-34 | 13.46 | 13.02 | (0.09) | |
| 12.50 27-Mar-35 | 13.55 | 13.10 | (0.20) | |
| 12.40 18-Mar-36 | 13.50 | 13.01 | 0.00 | |
| 16.2499 18-Apr-37 | 13.30 | 12.90 | (0.30) | |
| 9.80 24-Jul-45 | 13.40 | 12.85 | 0.10 | |
| 14.80 26-Apr-49 | 13.54 | 13.18 | 0.04 | |
| 12.98 27-Mar-50 | 13.53 | 13.18 | 0.03 | |
Treasury Bills
The T-bills market closed the week on a positive note as trading activity picked on some selected bills within the OMO and NTB yield curve. Investors showed interest for March and May 2021 OMO bills which traded between 9.30%-9.35% and also the June 2021 NTB bills which traded around 8.95%. Offers on special T-bills also improved by 40bps from yesterday’s closing at 8.90% albeit with no-bid to match for a trade
For next week, we expect to see better offers across most short-term instruments as commercial banks continue to remain on the SELL side in the light of the illiquid Money Market.
| Benchmark OMO Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NGOMOB 0 09/07/21 | 11.00 | 1.50 | 0.00 |
| NGOMOB 0 10/19/21 | 11.00 | 3.00 | 0.00 |
| NGOMOB 0 11/02/21 | 12.00 | 2.00 | 0.00 |
| NGOMOB 0 12/07/21 | 12.00 | 2.50 | 0.00 |
| NGOMOB 0 01/11/22 | 12.50 | 2.50 | 0.00 |
| NGOMOB 0 02/01/22 | 12.50 | 2.50 | 0.00 |
| NGOMOB 0 03/01/22 | 12.50 | 3.50 | 0.00 |
|
Benchmark NT-Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NIGTB 0 05/13/21 | 8.00 | 1.50 | 0.00 |
| NIGTB 0 06/10/21 | 9.00 | 1.50 | 0.00 |
| NIGTB 0 07/01/21 | 10.00 | 2.00 | 0.00 |
| NIGTB 0 08/26/21 | 10.00 | 2.00 | 0.00 |
| NIGTB 0 09/09/21 | 10.00 | 2.00 | 0.00 |
| NIGTB 0 10/14/21 | 10.00 | 2.50 | 0.00 |
| NIGTB 0 11/11/21 | 11.00 | 2.50 | 0.00 |
| NIGTB 0 01/13/22 | 11.00 | 3.00 | 0.00 |
| NIGTB 0 02/10/22 | 11.00 | 3.00 | 0.00 |
| NIGTB 0 03/01/22 | 8.00 | 1.50 | 0.00 |
Money Markets
Money market rates remained elevated closing the week as the cash crunch in the Money Market continues to bite. Most market players were able to stay out of the SLF and REPO window for today albeit this didn’t taper rates on the OBB and OVN which still increased by an average of 50bps to close the day at 18.75% and 19.25% respectively.
For next week, we expect rates to remain at double digits levels as outflows from Bond auction and Retail FX intervention dwarfs the anticipated FAAC credit and OMO maturity.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 18.75 | 18.25 |
| Overnight (O/N) | 19.25 | 18.75 |
FX Market
Supply in the I&E FX window improved from Apex bank intervention as traded volumes increased by 15%. Participants were bided between N396.45$ and N413.67/$ causing the closing rate to appreciate by 0.12% d/d to close at N411.00/$.
The Naira also remained relatively stable at the parallel market, with the transfer rates swinging around the N512/$ mark, while the cash rate traded at N496.00/$ as demand on both fronts remained persistent.
| FX Market | ||
| Current (N/$) | Previous (N/$) | |
| CBN SMIS | 380.69 | 380.69 |
| I&E FX Window | 411.00 | 411.50 |
| Cash Market | 496.00 | 496.00 |
| Transfer Market | 512.00 | 512.00 |
Eurobonds:
Buyers emerged across the Sub-Saharan markets following the slight sell-offs seen in the market yesterday as bid/offer spread tighten on most of the tracked papers. We also saw interest build on the back of a successful auction for the new Kenya 2034s issue opening the day at 6.21%/6.15% although most of the market trades settled around 6.18% eventually.
The NIGERIA Corporates continued to provide a haven for investors, as demand remained persisted across most of the tracked papers. The ETINL 2034s maintained its pace as the most sort after bond in recent times with trades changing hands at around 8.44% compressing slightly by c1.bps from yesterday’s level to close the week.